From a financial point of view, one benefit to companies of using temps is that the employment agency’s workers’ comp insurance covers the workers. But does this eliminate a liability for businesses, or just create a new one?
A recent court decision in Oklahoma shows what can happen when temporary workers are injured.
First, the details on the injury:
Wilson Paving & Excavating Inc. had a contract to dig trenches and lay pipe for a storm drainage system. To hire temporary workers for the job, Wilson went to Labor Ready, a local staffing agency.
It was through Labor Ready that Wilson hired Steven Broom.
Broom began laying pipe inside a trench that was five to six feet deep. The trench collapsed – not once, but twice.
The first time, Broom was covered in dirt to his waist. The second time the soil went up to his neck.
People at the job site were able to free Broom from the neck to the waist before emergency personnel arrived.
Emergency personnel couldn’t enter the trench to rescue Broom until the trench was safely reinforced. Until that happened, Broom was stuck, waist deep in dirt, in the trench.
Broom was eventually taken to the hospital where he was treated for serious injuries including rib fractures, collapsed lungs, pulmonary contusions, blood within the chest, fluid around the spleen and kidney, and a kidney laceration.
Broom collected workers’ comp benefits from Labor Ready, the temp agency. He didn’t receive any comp benefits from Wilson.
OSHA cited Wilson with five violations, including failure to:
- instruct employees in the recognition and avoidance of unsafe conditions
- protect employees with protective helmets
- provide safe means of egress out of the trench
- place and keep excavated materials at least two feet from the edge of the excavation, and
- provide an adequate protective system for employees in the excavation.
Broom sued Wilson for negligence, alleging the company:
” … owed Plaintiff a non-delegable duty to provide employees a safe place in which to work and breached that duty by ignoring standards set by OSHA for safety in trenches knowing injury or death was certain and/or substantially certain to occur with this combination of safety measures being ignored.”
An Oklahoma district court found Wilson liable, awarding Broom $1.15 million.
Neither Broom nor Wilson appealed the verdict.
However, Broom had to go after Wilson’s commercial general liability policy issued by Mid-Continent. The insurance company argued Broom’s injuries were excluded from coverage under the earth movement exclusion and the expected or intended injury exclusion.
An Oklahoma appeals court ruled Broom would be covered under Mid-Continent’s policy as a temporary worker, but the earth movement exclusion prevented a pay-out.
Broom and Wilson both appealed the ruling. The case went to the Oklahoma Supreme Court.
Why did the company buy the insurance policy?
Wilson had two insurance policies to cover workplace accidents: one for workers’ comp for injured employees, and a general liability policy for injuries to the public with Mid-Continent.
The company bought the second policy from Mid-Continent to “cover any and all other claims that would not be covered by the workers’ compensation insurance.”
Oklahoma’s top court noted that the Mid-Continent policy “does not specifically exclude from coverage bodily injury to temporary workers during work-related activities.”
For that reason, the high court agreed with the trial court that Broom was a temporary worker for Wilson and would be covered under Mid-Continent’s policy.
Next the attention turned to the two exclusions.
In its ruling, the district court said while Wilson didn’t expect or intend to injure Broom, the company knew serious injury was substantially certain to occur.
The state supreme court agreed with that, therefore the expected or intended injury exclusion didn’t apply.
Earth movement exclusions in insurance policies were generally meant to exclude catastrophic and extraordinary calamities such as earthquakes and landslides. Reason: Those disasters are almost impossible to predict.
Mid-Continent argued a trench collapse is earth movement under the policy.
The Oklahoma Supreme Court found the earth movement exclusion in Mid-Continent’s policy was ambiguous:
“Although the provision undoubtedly excludes coverage for naturally occurring earth movement such as earthquakes, landslides, and mud flows, several of the terms within the provision, including setting, slipping, falling away, and caving in, could be caused by naturally occurring events, man-made events, or both.”
But in the end, the court sided with the company:
“We conclude that it is highly unlikely that Wilson Paving, a company whose business involves excavation, tunneling, underground work and earth moving, would have purchased the policy with knowledge that it would not cover losses to property or injuries to persons other than employees due to man-made earth movement.”
The Oklahoma Supreme Court ruled the earth movement exclusion in Mid-Continent’s policy excludes only earth movement caused by natural events. Coverage for Broom’s injuries weren’t barred by the exclusion.
Having dealt with both exclusions, the court ruled the insurance company would have to cover the trial court’s award to Broom.
But the situation could have been much worse for the company had the court determined that one or both of the exclusions applied and the insurance policy didn’t have to cover the court award. In that case, the company would have had to pay out of pocket.
Which brings up the subject of contract and temporary employees. It may seem like a good deal that their workers’ comp would be covered by the staffing agency from which they were hired.
But that leaves the company open to this type of lawsuit. The workers’ compensation exclusive remedy doesn’t apply to temps.
What do you think about the court’s decision? Let us know in the comments.
(Steven L. Broom v. Wilson Paving & Excavating Inc., Supreme Court of Oklahoma, No. 109813, 3/7/15)
